Indian country: Five unique legal considerations companies should understand

Nancy J. Appleby Esq., Appleby Law PLLC, Alexandria, VA

As the United States works to decrease its dependence on imported oil, land under the supervision of the United States government that has been set aside permanently for the use of Native Americans – legally termed Indian country – is a vital resource that is growing in importance. The National Congress of American Indians (NCAI) has estimated that tribal lands can contain nearly a quarter of the nation's on-shore oil and gas reserves. And much of this is in the Western United States. The Bureau of Indian Affairs' Division of Energy and Mineral Resources has compiled reports on known and potential oil and gas resources, or "plays," on tribal land in Colorado, Montana, New Mexico, North Dakota, Oklahoma, South Dakota, Utah and Wyoming.

While oil and gas opportunities in Indian country abound, prudent exploration and production companies should understand that there are legal complexities that must be addressed when considering a project on tribal land. Indian tribes are sovereign entities that have their own governing bodies. They also continually interact with the federal government and its primary administrative agency for tribes, the Department of the Interior Bureau of Indian Affairs (BIA). Pursuing oil and gas opportunities requires negotiating with both tribal and federal authorities, as well as structuring business contractual agreements to accommodate the unique aspects of tribal law. In reality, few people are familiar with federal Indian law or tribal law, governments and dispute resolution systems, which reflect each tribe's sovereign status and unique culture, language, laws, mores and traditions. And this lack of familiarity can cause problems.

Upstream energy companies are often involved in complex negotiations with sovereign governments in other countries. But the interplay of the more than 560 tribal sovereigns with extensive federal government involvement in Indian country is unique, largely because in Indian country, there is a blend of cultural and legal issues that cross federal, tribal and – sometimes – state laws. Developing an energy project with a tribe or tribal entity on tribal land is not a conventional transaction with conventional leases, terms, financing and collateral. In Indian country there may be no familiar law governing the granting and perfection of security interests. Tribal law may not be codified and there may be no established formal judicial system for hearing disputes. There may be no written rules of court procedure. Given these factors, it is essential that oil and gas companies know in advance about five key issues that can make or break their success in Indian country.

1) Know the federal rules.

There are several federal statutes specific to development of oil and gas on Indian lands. They include the Indian Mineral Leasing Act of 1938 (25 USC 389a-g), the Indian Mineral Development Act of 1982 (25 USC 2102 et seq.) and Title V of the Energy Policy Act of 2005. These statutes and their implementing regulations in Part 25 of the Code of Federal Regulations address the process for, and limitations on, acquiring and administering individual oil and gas leases of tribal and allotted land; permit agreements that permit energy development on Indian lands and establish a process by which a tribe can obtain a Tribal Energy Resource Agreement (TERA) that grants to the tribe authority to review, approve and manage leases, business agreements and rights of way for energy development on Indian lands.

Additionally, oil and gas developers should be familiar with 25 USC 323, which empowers the Secretary of the Interior to grant rights of way for all purposes over and across Indian lands held in trust by the United States.

2) Know how land titles are conveyed.

Understanding Indian land title also is important. In many cases, title to Indian land is held in trust by the United States for the tribe's benefit. The general rules are that tribal trust land may not be sold, taxed or encumbered and that BIA approval is required for leases of trust land. Lease terms typically are limited to 25 years with a 25-year renewal, unless otherwise provided by statute.

BIA approval is also required for a mortgage on a leasehold interest in tribal land. A leasehold mortgage may permit the lender to exercise dominion and control over leased land in the event of a default, but determining the status of land requires reviewing treaties, acts of Congress, proclamations by the Secretary of the Interior, BIA title records and other sources. Exploration and production companies should always involve a title company with appropriate knowledge to conduct an Indian land title search and to insure any leasehold and leasehold mortgage.

3) Know the range of government energy incentives available.

The federal government's involvement with land leases dovetails programs and statutes meant to encourage tribal energy development. Incentives exist, but their interplay is complex.

The Department of the Interior's Division of Energy and Minerals Development provides engineering support, economic advice, and technical assistance to Indian landowners seeking to manage and develop their energy and mineral resources. This includes supporting tribes in developing effective energy and mineral development strategies, assisting tribes during Indian Mineral Development Act negotiations, providing technical data and interpretations for exploration and development of resources, and managing and maintaining existing Indian energy and mineral data.

The Department of Energy's (DOE) Tribal Energy Program promotes tribal energy sufficiency and economic growth by providing financial, technical and educational assistance. DOE's tribal program emphasizes renewable energy, but its website includes a guide to assessing a range of energy resources and provides mineral resource reports for tribal lands in several western states. And quasi-government agencies, like the National Energy Technology Laboratory's Native American Initiative, offer technical and program assistance to stimulate economic development and increase oil and natural gas production on tribal lands through innovative petroleum technologies.

4) Know if there is a valid waiver of sovereign immunity.

Typical remedies in the event of a default on an oil and gas project, including litigation, may not be available under applicable federal law and tribal law because, like other sovereigns, absent a clear waiver, Indian tribes are immune from lawsuit. Tribes regard their sovereign immunity as an essential feature of their sovereign status, and they may resist waiving it. However, as sovereigns, tribes may – and often do – elect to waive their immunity from suit on a case-by-case basis and to negotiate terms and conditions of a waiver that are acceptable to the tribe and to the contracting party.

At its core, to be enforceable, the waiver of a tribe's immunity from suit must be unambiguous and unequivocally expressed. And it must be authorized and executed in accordance with tribal law. Whether persons purporting to act on behalf of a tribe or a tribal entity have the power and authority to speak for their principals strictly is a function of tribal law and custom, the nature of the entity and the entity's organizational documents. Before contracting with a tribe or a tribal entity, the non-Indian party must understand the nature of the entity with which it is contracting and the protocol and conditions for entering into binding, enforceable agreements and for obtaining a binding, enforceable waiver of immunity. Failing to appreciate each of these issues is likely to result in unenforceable waivers of immunity and agreements with tribes and their business enterprises.

5) Know where disputes will be adjudicated.

While the better practice is for a tribe to expressly, unequivocally and clearly waive its immunity from suit and to consent to jurisdiction and venue, it is not uncommon for waivers of sovereign immunity to be silent respecting jurisdiction, leaving the parties to argue over jurisdiction later. While federal courts clearly have jurisdiction over questions rooted in federal law, tribal courts generally have jurisdiction over persons acting on Indian land. Businesses too often assume that their disputes with tribes or tribal businesses will be heard by a federal court. But it is a basic principle that federal courts have jurisdiction only where there is a question of federal law to be decided or where the parties reside in different states and meet the requirements for diversity jurisdiction. Deferring arguments over which court will have jurisdiction to adjudicate disputes between parties to a contract may leave the non-tribal party without a forum in which to adjudicate at all. Be sure to include a provision for consent to jurisdiction and venue in the tribal waiver of immunity. Also, however, be prepared to adjudicate claims in tribal court, and consider the benefits and risks of doing so before signing a contract with a tribe.

Afterward

Oil and gas exploration and production companies eager to pursue Indian country energy development opportunities might consider these five proactive steps to be unnecessarily complex and an impediment to doing business in Indian country. To the contrary, having a better understanding of the tribe with whom you are doing business and of the uniqueness of Indian country will facilitate your deal. Don't forget the fundamental message, however: Know the rules, or suffer the consequences if something goes wrong. Upstream projects will have a much better chance of a favorable outcome by consulting with Indian law counsel first, to weigh the risks against the benefits of the proposed project. and to settle all the necessary details if you decide to proceed. OGFJ

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